The sequel! Better than Sharknado 2! Moody’s has reduced now reduced the Chicago Public Schools’s and the Chicago Park District’s bond to junk status as well. That means that they, too, will need to come up with substantial payments to the banks. editors of the Wall Street Journal put in their two cents:
Illinois’s domination by public unions has the state dancing on the edge of fiscal freefall. The state Supreme Court ruled last week that Springfield can’t alter pension benefits, prompting Moody’s this week to downgrade the debt of the city, its public schools and park district all to junk status. Now the Chicago Teachers Union wants to make another contribution to the collapse.
In May the union filed an unfair labor practice complaint with the Illinois Educational Labor Relations Board, accusing the school district of failing to bargain in good faith and rejecting mediation to reach a new contract. The union’s complaint? The school district wants teachers to chip in more for their pensions. The horror.
The dispute goes back to 1981, when in lieu of larger pay raises the district agreed to pick up seven percentage points of the teachers’ contribution of 9% of their salaries to their pensions. This is on top of the district’s own contribution. Teachers have since become accustomed to paying only 2% of their salaries for pensions, about $1,496 a year on average.
Many current teachers weren’t in the school system in 1981, but they like the perk of paying a fraction of their pension cost. Who wouldn’t? The 2% contribution is far less than the 9% contributions made by many other public employees in Illinois, let alone the 6.2% payroll tax for Social Security or what private workers pay into 401(k)s.
Teachers are also comparatively well compensated. The Illinois State Board of Education says the average Chicago teacher salary is about $71,000 a year. That compares to Chicago’s median salary of $47,270 in 2009-2013, according to the Census Bureau. The average starting pension for a Chicago teacher retiring in 2011 after a public-school career was $77,496, according to the Illinois Policy Institute. The city will pay a teacher who retired in 2011 some $2.4 million during retirement, up from $1.35 million a decade earlier.
The starting wage for a ten month position with bachelors only for a Chicago school teacher is around $50,000. Much of the foregoing is territory I covered during the teachers’ strike a couple of years ago. To one of my posts a commenter who was very favorably disposed to the CTU admitted that their cause was not a particularly sympathetic one.
If anyone has ideas for solving CPS’s problems without cuts, I’m all ears. I think the best we’re going to come up with is a list along the lines of the one I proposed yesterday, i.e. shared sacrifice. There does come a point at which Chicago will realize a Detroit-like degenerative spiral. That last step is a long one and you don’t necessarily know when it will come.
Better than Sharknado 2!
That, sir, is sacrilege!
On Topic: Do the teachers not pay into SS then?
Also, every child of the ’80s will tell you that the title should be:
Even has a useful soundtrack! While Rahm claims he’s Stylin’ Profilin’, the city’s singing I Don’t Wanna Come Down. But down they must go.
(No, you really REALLY don’t want to click on those links. Seriously, you do and I won’t be held responsible!)
Neither Chicago teachers nor Illinois teachers more generally pay into Social Security. In theory they have deductions made from their paychecks for the Chicago teachers pension fund or the Illinois Teachers Retirement System fund. In practice their districts pick up all or most of their contributions.
This might be a good time to remind folks of something I’ve mentioned before. Chicago taxpayers are in the unique situation of paying for the retirements of Chicago teachers and non-Chicago teachers. That’s manifestly unjust. People living in Arlington Heights don’t pay a penny towards the retirement of Chicago teachers but I contribute to the pensions of teachers in Arlington Heights’s schools.
Oh, God, now you’ve done it. Jimbino-bot is going to show up and start complaining about the breeders now.
“Chicago taxpayers are in the unique situation……..”
I didn’t know that. Where do you find a list of the subsidized districts? The detail for Naperville districts 203 and 204 shows use of funds. Surely it’s not included. They get a kings ransom in prop taxes, and 203 is siphoned off to Aurora as well.
Teachers’ pensions are paid out of funds. Most Illinois teachers’ pensions are paid from the Illinois Teachers Retirement System (TRS). Chicago’s teachers have their own pension fund, distinct from the TRS.
The TRS has several primary sources of funds: deductions from teachers’ paychecks, payments from the teachers’ home districts, payments from the state which ultimately come from tax receipts, and earnings from the fund’s investments.
The CPS has these sources of funds: deductions from teachers’ paychecks (2%), payments from the CPS (including the balance of the teachers’ notional 9% “contribution”) which ultimately come from tax receipts, and earnings from the fund’s investments.
Consequently, Chicago taxpayers pay the entirety of CPS teachers’ pensions excepting the 2% deduction and any fund earnings and they also pay their portion of the state’s payments into the TRS via their state tax bills. We get socked twice.
Well, that does seem unjust. Something doesn’t balance out, though, that I would need to investigate. My $21k prop tax bill goes primarily to schools. So unless Naperville teachers are reaping an incredible windfall money must be going to the general kitty.
@Guarneri, your property taxes are going to Naperville schools; Dave’s property taxes are going to Chicago schools. What Dave is complaining about is that the State (probably primarily through income tax revenues) pays into the State teacher’s retirement fund, but not very much into Chicago’s.
PD
Yeah. Chicago is getting screwed. But it raises an issue as to what the Napervilles of the world do with all the money compared to other geographies. I know for a fact that district 203 ends up with money sent over to Aurora, a variant on the Chicago subsidy, although it’s in the direction of well off to not well off.
Chicago schools also get education funding that the suburbs and downstate don’t get, either through blockgrants or manipulating the education formulas. That’s why the unequal pension contributions do not get resolved, even though every year since the Chicago pension went under the 90% funded mark (FY 2005), there have been Democratic governors and legislatures. it’s easier to patch things with block grants than re-open the formulas for state education funding. And to the extent Chicago gets money it can use to hire more special education teachers or increase teacher salaries, it aggravates the long-term pension problem.